A multimillion-dollar settlement reached quietly during Christmas week between California farmers and the Bush administration is likely to lead to more lawsuits seeking big payouts from taxpayers.

The $16.7 million settlement cements, for the first time, a court finding that government efforts to protect endangered species violate the constitutional protection of property rights.

Rather than appeal, as California state officials and some federal government lawyers urged, the Bush administration decided to accept defeat and pay farmers for water diverted to help endangered salmon.

In doing so, the administration signaled its approval of the idea that farmers served by government water projects own the water delivered through those projects.

"I think it was a terrible thing that the government didn't appeal it, partly because it's wrong and partly because the government is usually quite zealous about trying to protect the Treasury against claims that are disputable," said Joseph Sax, a law professor emeritus at the University of California.

"It's obvious that the case is seen as a green light by property rights advocates," added Sax, who was a counselor to the Clinton administration on water and other environmental issues.

The case, known as Tulare Lake, marks the first time a court has found the government's enforcement of the Endangered Species Act a violation of the Fifth Amendment prohibition against taking private property without compensation, according to the farmers' lawyer in the case, Roger Marzulla.

Several similar lawsuits are already on deck: The city of Stockton and other surrounding agencies seek $500 million for water they say the federal government failed to deliver from New Melones Dam over a 10-year period; Klamath farmers want $100 million for water diverted to protect endangered salmon and suckers; and a small Ventura County water district is expected soon to file a claim for about $8 million for water released in the Ventura River for steelhead.

The success of the Tulare case is expected to bring even more lawsuits.

"I think this fight is going to get a lot meaner before it gets nicer. There's tens of billions of dollars at stake," said Andrew Lloyd, a lawyer for the Sacramento-based property rights law firm, the Pacific Legal Foundation.

At issue is whether water users actually own property rights to the water they use. If so, the Constitution protects them from governmental "taking" of that water without compensation.

That could make protecting endangered species very expensive, and might eventually make it too costly for government agencies to protect endangered fish and other aquatic species.

In a March 2004 memo urging the Department of Justice to appeal the case, lawyers for the National Oceanic and Atmospheric Administration said the legal threat presented by the Tulare Lake case was already making it more difficult for the agency's biologists to enforce endangered species protections for salmon.

Environmentalists and others contend water is a public resource and that, with a few exceptions, farmers and urban water agencies do not own it.

The Tulare Lake case says they do. The ruling is not binding on other courts, but the fact that the government declined to appeal the case leaves the door open for other water districts to file similar claims, according to lawyers on both sides of the issue.

Other judges could rule differently, or they could follow the lead of the Tulare Lake judge, Judge John Paul Wiese of the U.S. Court of Federal Claims in Washington, D.C.

"It (the settlement) sends a clear message that the Bush administration wants to encourage lawsuits against the government," said Hal Candee, a lawyer for the Natural Resources Defense Council.

A spokesman for the U.S. Department of Justice did not return phone calls.

But Lloyd, the property rights lawyer, suggested the government may be waiting to appeal until it has a case it is sure to win.

Candee dismissed that argument, saying that many experts believe the government could have won an appeal of the Tulare Lake case. Water users with long-term water contracts have tried for years to force the government to pay them when some of their contracted allotment of water is shifted to endangered species.

Some have sued for breach of contract, while others, like those in the Tulare Lake case, have gone further by claiming to be deprived of private property.

Neither legal course has been successful until now.

In the Tulare Lake case, the federal claims court found that even though the water rights were held by the California Department of Water Resources, their customers gained a property right to the water through their contracts. Marzulla, a Washington, D.C. lawyer for several water users, successfully argued that his clients owned rights to their contracted water because the state water department exists to deliver water to them.

The state Department of Water Resources "has only one right to the use of that water, and that is to put it in the California Aqueduct and send it south," he said.

The water users are customers of the state-owned State Water Project, which includes Lake Oroville, massive pumps at Byron and the 444-mile California Aqueduct, which ends in Riverside County.

"The government is certainly free to protect the fish as long as it is willing to pay for it," Marzulla said.

To environmentalists and others, the contracts do not amount to ownership of water. They also say the possibility of shortages is spelled out in the contracts.

If the ruling stands, government agencies may decide they can no longer afford to take actions aimed at protecting endangered fish and other aquatic species, said Sax, the Berkeley professor emeritus.

"If it (the Tulare Lake case) is followed in other cases and by other judges, it could have a very powerful, adverse effect on enforcement of the Endangered Species Act," Sax said.

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